Thursday, August 18, 2005

Big tax hikes in 'broke' Zimbabwe, aka blood from a turnip tax plan

Massive economic problems in your country? Rather than make needed changes in order to free up the economy, take the Mugabe route and raise taxes. Even most Democrats in America can see the folly in that plan.

Zimbabwe's finance minister has imposed a string of tax rises to bridge a huge spending shortfall and the effects of drought and slum clearances.

A tax on drinks and cigarettes has been increased by 50% and mobile phone airtime will also be subjected to a 22.5% tax, Herbert Murerwa said.

Zimbabwe is beset with shortages of food, fuel and foreign currency, and rampant unemployment and inflation.

An opposition MP said the extra budget showed that the government was "broke".

South Africa is considering giving an emergency loan to Zimbabwe, so it can repay its debts to the International Monetary Fund and avoid expulsion.

From September public transport buses will have to pay a quarterly tax and VAT will be raised by 2.5% to 17.5%, Mr Murerwa announced in a supplementary budget.

From the measures, Mr Murerwa said he hoped to raise 6.6 trillion Zimbabwean dollars, which is $356m at the official exchange rate and $146m on the black market rate. [...]

It will be a miracle if they raise even a third of that. Expect more confiscations of goods from the haves as a response to low tax revenues. As the country sinks even lower, people will increasingly see they can no longer look to the government to protect and serve them, leading to even smaller revenues. The final descent has begun.

The opposition Movement for Democratic Change (MDC) said the tax hikes would bring more suffering to Zimbabweans

"What the minister has done is to tell us straight in the face that the government is broke and they are prepared to drive the economy to a fatal crash," the MDC's Tapiwa Mashakada told parliament, AFP reports.

Some of the money will help with food imports to feed some 4m people which the United Nations estimates are in need of food aid. [...]

Government critics blame Zimbabwe's economic problems on the seizure of white-owned land over the past five years.

The government blames food shortages on drought and economic sabotage by Western countries, led by the UK, opposed to land reform.